Intrauterine growth retardation (IUGR) has been linked to later development of type 2 diabetes in adulthood. Emerging data suggest that epigenetics may be an underlying mechanism. Decreased Pdx1 expression, a key regulator of ss-cell growth and function, plays a pivotal role in the development of diabetes in humans as well as in IUGR animals. One of the earliest molecular events involved in silencing the Pdx1 promoter in fetal pancreas of IUGR animals is the loss of USF1 binding. This is coincident with histone deacetylation, which suggests that in the absence of USF1, chromatin reverts to a heterochromatin conformation leading to transcriptional silencing. We suggest that USF1 binding establishes an active chromatin domain by recruiting histone modifying enzymes which maintain high levels of histone acetylation and methylation at Pdx1 as well as at other genes regulated by USF1 in the ss-cell. In previous studies we identified extensive genomic DNA hypermethylation and hypomethylation in IUGR islets. These alterations in DNA methylation were in highly conserved intergenic sequences and were associated with significant changes in expression of adjacent genes, suggesting that these may represent cis-regulatory sites (distal enhancers). Taken together, these studies and our data suggest DNA methylation and histone modifications interact at intergenic loci to regulate gene expression. Specific Aim 1: To test the hypotheses that USF1 recruits histone-modifying enzymes that maintain H3 acetylation and H3K4 methylation, and that loss of USF1 binding initiates chromatin remodeling in ss-cells. Specific Aim 2: To test the hypothesis that changes in DNA methylation in combination with histone modifications at intergenic loci (distal enhancers) alter gene expression in IUGR islets. Specific Aim 3: To test the hypothesis that the mechanism by which gene expression is increased in IUGR islets occurs through the induction of histone modifications, which in turn drive the loss of DNA methylation.